Promoters of Asian Paints have pledged 1.43 crore equity shares 14.98 per cent of the paid up equity capital held by them as securities through their associate companies. Its promoters have utilised the proceeds of shares pledged with lenders to raise stake in the company through secondary market purchases.

Company vice-chairman and MD Ashwin Dani said in a regulatory filing to the BSE, "The money borrowed have been invested in the purchase of Asian Paints' shares through the secondary market and by my family through creeping acquisition." 

The company said the pledges have been made over the last few years and the promoters' holding in the company has now gone up from around 40 per cent to 50 per cent.

The reporting seems to match the figures in the balance sheets of the company. As per the Asian Paints website, the aggregate percentage of non-promoter shares were over 57 per cent in the quarter ending 30 September 2004. It further reduced to around 52 per cent in June 2006. As on 31 December 2008, the non-promoter share holding was down to around 50 per cent.

Asian Paints is India's largest and Asia's third-largest paint company with a turnover of Rs4,400 crore (around $1.1 billion). Its stock fell by about 10 per cent when the disclosure was announced.

Capital markets regulator Securities and Exchange Board of India (SEBI) has made it mandatory for promoters to disclose details of shares pledged by them in their listed entities.

SEBI has mandated two kinds of disclosures - event-based disclosures, which must be made as and when the shares are pledged, and periodic disclosures, which must be made when companies report their quarterly statements to the stock exchanges. For event-based disclosures, SEBI will change the regulations and for periodic disclosures it will amend the listing agreement

Among the early disclosures were those of promoters of Godrej Consumer Products, United Spirits, MindTree, JSW Steel, Asian Paints. Great Offshore, Nagarjuna Construction and Bharti Shipyard.

Next to Asian Paints, United Sprits has been the largest pledging of shares disclosed. Of the total pledged shares of 18.6 million shares, 13.7 million shares is treasury stock totalling to close to 14 per cent stake in United Spirits.